Question

Suppose that on January 1 you have a balance of $3500 on a credit card whose APR is 19%, which you want to pay off in 1 year. Assume that you make no additional charges to the card after January 1.

Answer 1

To calculate how long it will take to pay off the credit card balance, we can use the formula for compound interest. Plugging in the given values, the credit card balance cannot be completely paid off in 1 year with $800 monthly payments.

Step-by-step explanation:

To calculate how long it will take to pay off the credit card balance, we can use the formula for the compound interest. The formula is:

Final Balance = Principal * (1 + APR/100)^n

We can rearrange the formula to solve for n: n = (log(Final Balance/Principal) / log(1 + APR/100))

Plugging in the given values:

n = (log(0/3500) / log(1 + 19/100))

Since the logarithm of 0 is undefined, it means that the credit card balance cannot be completely paid off in 1 year with $800 monthly payments.